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MAY 2003 I. LEGISLATIVE/REGULATORY
UPDATE SARS Workplace Guidelines Issued The Centers for Disease Control and Prevention has issued guidelines advising employers on how to monitor employees for symptoms of Severe Acute Respiratory Syndrome (“SARS”) to help prevent the spread of the virus. The guidelines are available at www.cdc.gov. Also, the Occupational Safety and Health Administration has compiled information regarding SARS in the workplace at www.osha.gov.
The Equal Employment Opportunity Commission (“EEOC”) has implemented a voluntary mediation pilot program through which discrimination charges filed with the federal agency may be referred back to a participating employer’s internal dispute resolution program. Under the program, an individual who has filed a discrimination charge against a participating employer may elect to have the charge held in suspense for a period not to exceed 60 days to provide an opportunity for the dispute to be resolved using the employer’s existing dispute resolution program. If the dispute is resolved, the charge will be closed. If not, the EEOC will recommence processing the charge. To participate in the program, an employer’s internal dispute resolution program must meet specific criteria, including:
More information may be found at www.eeoc.gov.
II. JUDICIAL UPDATE Workplace Affairs The California Supreme Court agreed to review Mackey v. Department of Corrections to decide whether a supervisor, who had affairs with employees and promoted them over other employees, can be sued for sex discrimination. All seven justices voted to review the decision by a California court of appeal in Sacramento that held such conduct, while unfair, does not violate the California Fair Employment and Housing Act’s prohibitions against sex discrimination or harassment. The Mackey case involved a suit by two former female state prison employees who accused the warden at Valley State Prison for Women of having affairs with a secretary, an associate warden, and a counselor and giving each of them favorable treatment. The employees claimed they were harassed and ostracized when they complained about the favoritism.
Although California law allows tip-pooling arrangements, it prohibits an employer or agent from collecting, taking, or receiving any gratuity given to an employee by a patron. The law defines an agent as every person, other than the employer, having the authority to hire or discharge any employee or supervise, direct, or control the acts of employees. Labor Code sections 351 and 350(d). In Jameson v. Five Feet Restaurant, Inc., a restaurant employer was found to have imposed a mandatory tip sharing policy on its servers in violation of this law. Five Feet (“the Employer”) required servers to give ten percent of their tips to the floor manager, whose job was to supervise servers, greet and seat patrons, set up reservations, and assist in serving tables. The court acknowledged that tip pooling arrangements are permissible, so long as they do not involve sharing with an employer or agent. The Employer argued that its floor managers also are involved in serving customers and are therefore entitled to share the tips. The court responded that the law does not require the floor manager’s duties to be exclusively, or even primarily, hiring, discharging, or supervising employees. Thus, the fact that floor managers provided some direct customer service did not alter their status as agents under California law. Jameson highlights other important legal issues regarding employee tips. California law permits tip pooling, but as Jameson demonstrates, the management team must not share in the pool. The case also involved the Employer asserting that federal wage and hour rule laws permit an employer to pay less than minimum wage to a tipped employee by including the tips the employee receives in the calculation of the employee’s wage. The Jameson court, however, confirmed that California’s wage and hour rules prohibit this practice. In addition, if customers pay by credit card, the employer must pay the employee the full gratuity indicated on the charge slip no later than the next regular payday after the customer authorized the credit card payment. An employer cannot deduct from the employee’s tip any processing fees it may have to pay to the bank or credit card issuer.
In Reynolds v. Bement, a California appellate court affirmed the trial court’s finding that agents of a corporation could not be held personally liable for implementing unlawful wage and hour policies to the detriment of the employee. Steven Reynolds (“the Employee”) was an Earl Scheib (“the Employer”) shop manager, who filed a complaint against the Employer, and its president, Christian Bement (“Bement”), seeking damages, equitable relief, and restitution for himself and similarly situated employees of the Employer. Later, the Employee named other officers and directors of the Employer as defendants. The Employee’s complaint alleged fourteen causes of action against the officers and directors asserting that the directors and officers were considered “employers” such that they could be held liable for wage and hour claims, including misclassifying nonexempt employees as exempt employees. The court began its analysis by determining whether the officers and directors were liable as employers. Historically, employees have been able to recover wages from their employer, but not the employer’s agents. The court concluded that the Industrial Welfare Commission drew a distinction between “employers” and “employers and their agents.” The court went on to note that the Legislature provided that only the party “employing labor” is burdened with complying with wage and hour laws. In contrast, the court noted, misdemeanor penalties and civil fines may be imposed against persons acting on behalf of an employer or officers and agents of the employer. The court further opined that management is not personally liable to third persons for actions of the corporation unless they participate in, authorize, or direct that the act be taken. Further, the court stated, more is required to create this personal liability beyond breach of duty to the corporation. In light of Reynolds, individual officers, directors, or managers are not personally liable for unpaid wages under California law. However, the court made it clear that individual officers, directors, or managers can still be liable for civil penalties and misdemeanor fines in connection with wage and hour violations. In addition, under federal wage and hour law, owners, officers, managers, and supervisors may sometimes be personally liable for damages.
In Clackamas Gastroenterology Associates, P.C. v. Wells, the United States Supreme Court issued a ruling that could affect the reach of the Americans with Disabilities Act (“ADA”) for smaller employers. The Court looked at whether four physician-shareholders should be counted as employees of their medical clinic for purposes of satisfying the ADA’s 15 employee requirement. The Court adopted the EEOC’s guidelines, which focus on the control the individuals exert on the operation and management of the enterprise. The Court then sent the case back to the lower court to determine whether the physician-shareholders exerted sufficient control to be considered employers rather than employees. This ruling is significant to small employers who teeter on the border of the ADA’s 15 employee requirement. The ruling also could affect whether the ADA protects these professionals from disability discrimination as employees. If they are employees, instead of employers, they would fall under the umbrella of the ADA and be permitted to sue their employer for discrimination.
In Kaplan v. City of North Las Vegas, a peace officer (“the Employee”) was discharged after he was erroneously diagnosed with a permanent condition which prevented him from performing certain job functions. The trial court granted the City’s (“the Employer”) motion for summary judgment because the Employee could not establish he was a “qualified individual with a disability” under the ADA. The Ninth Circuit affirmed summary judgment in favor of the Employer. The Employee injured his hand on the job. His position required that he use force with prisoners during altercations, use his hands to physically restrain prisoners, place prisoners in handcuffs, and use firearms. After the Employee was injured, he was placed in a temporary position where he was not required to detain prisoners, use handcuffs, or use firearms. The Employee received rehabilitation treatment for his injury and was diagnosed with having rheumatoid arthritis of a nonindustrial and preexisting nature. The Employee’s employment was subsequently terminated. The court found that the Employee was unable to perform the essential functions of his position unless he was provided an accommodation. It was undisputed that at the time of the Employee’s termination, he suffered from severe pain in his hand. As the Employee was misdiagnosed with rheumatoid arthritis at the time he was terminated, he sought relief as an individual “regarded as” having a disability, not someone who is actually disabled. The court concluded that although there is no distinction within the definition of a disability, this does not necessarily lead to the conclusion that an individual “regarded as” having a disability must be provided with a reasonable accommodation. Therefore, if “regarded as” individuals had a right to reasonable accommodation, impaired employees would be better off under the statute if their employers treated them as disabled, even if they are not actually disabled. The court found this to be contrary to the purpose of the ADA and held there was no duty for an employer to accommodate an employee who is merely “regarded as” disabled.
If the plaintiff in a sexual harassment suit can prove she was the victim of a constructive discharge meaning that working conditions were so intolerable that she was forced to quit the defendant is not entitled to invoke the so-called Faragher/Ellerth defense, the Third U.S. Circuit Court of Appeals has ruled. The federal courts are sharply split over the question of whether a constructive discharge qualifies as a tangible employment action for Faragher/Ellerth purposes. With its decision in Suders v. Easton, the Third Circuit rejected the views of the Second and Sixth Circuits and a handful of district courts that followed them and opted instead to adopt the reasoning that a constructive discharge, if proved, is equal to a firing or a demotion and, therefore, renders the Faragher/Ellerth defense unavailable. The Faragher/Ellerth defense outlined by the U.S. Supreme Court in its 1998 decisions in Burlington Industries Inc. v. Ellerth and Faragher v. City of Boca Raton has two components. To invoke the defense, an employer must show that it “exercised reasonable care” to prevent and promptly correct any sexually harassing behavior and that the employee “unreasonably failed to take advantage” of those preventive or corrective opportunities. The decisions were widely hailed as a victory for employers because they offered a roadmap for summary judgment for companies that establish and enforce effective workplace policies. But the high court also held the defense was not available in cases that resulted in a “tangible employment action,” such as termination, failure to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits. The Third Circuit does not have jurisdiction
over California. Nonetheless, the Suders case raises a difference
in interpretation by the circuits
that the United States Supreme Court may adjudicate. Incidentally,
it is still an open question whether the Faragher/Ellerth defense
is applicable
to harassment claims asserted under the California Fair Employment
and Housing Act -- the California Supreme Court is still reviewing the
case
of Department of Health Services v. Superior Court, which may decide
the issue. We will continue to keep you advised in regard to developments
with the Faragher/Ellerth affirmative defense. If you would like to discuss these or
any other employment law matters, please do not hesitate to contact
any member
of Klinedinst's Employment Law
Department.
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